District must repay diverted meal money

SANTA ANA Orange County's largest school district has been ordered to repay $2.7 million that it illegally debited from its student meal program over the past five years, according to a sweeping state audit released Wednesday that examines misuse of money intended to feed impoverished children.

In one instance, the Santa Ana Unified School District billed a $301,000 kitchen roof repair to its student meal program, even after being informed by state officials twice – in writing and in person – that student meal funds could not legally be used to fix the central kitchen's roof.

Santa Ana Unified also ordered its central kitchen to routinely provide free meals and snacks to high-level district officials, the report noted, including at twice-monthly school board meetings.

“Most of this is money that the districts received to feed their lower-income students, so if not for these students, they wouldn't have received it,” said the audit's author, Jim Sweeney, principal consultant for the state Senate Office of Oversight and Outcomes. “And instead, some of that money was diverted to other costs.”

The report, titled “Food Fight: Small Team of State Examiners No Match for Schools that Divert Student Meal Funds,” examined eight recent cases in which the state Department of Education determined that school districts had illegally debited a combined $170 million from their student meal programs.

Santa Ana Unified trustee John Palacio said the district already had adjusted its accounting practices based on some of the state's findings, but he emphasized that billing requirements were complex and that disagreements over interpreting them were commonplace and to be expected.

“If the law was as simple as, you can do this or you can't, we would understand it,” Palacio said. “We're here to serve our students the best way we can with the resources we have to work with. That's not in defense of our staff; it's about understanding the complexity of (the) California Education Code.”

Palacio also said that, contrary to what the Senate report indicated, meals provided to district trustees and administrators never were absorbed by the district's cafeteria fund.

Santa Ana Unified spokeswoman Deidra Powell did not return a phone call Wednesday seeking comment, but issued a statement saying the district was “working vigorously to ensure that all areas are being addressed,” including a reorganization of the district's food services department.

“We take the allegations identified in the report very seriously, and we have been working vigorously to ensure that all areas are being addressed,” Powell said.

School district says guidance insufficient

In the report, Santa Ana Unified defended its billing decisions, citing an “absence of guidance” from the state on accounting methods that came down to a matter of “interpretation.” Santa Ana Unified has formally contested repaying at least $2.4 million, according to the report.

“When you look at the narrowest interpretation of anything, you can exclude just about anything you want,” Michael Bishop, the district's deputy superintendent for business services, states in the report.

The state Senate report concluded that the eight California school districts examined dramatically understaffed school cafeterias and tended to serve processed foods rather than more expensive fresh foods. Consequently, they were able to hoard large sums of federal and state student meal money that they then diverted to illegal uses, the report said.

“The misappropriations addressed in this report are not examples of funds skimmed or pocketed for personal profit,” the report said. “Instead, they are in most cases attempts by school districts to use cafeteria funds to pay for a greater share of personnel, utility and other costs.”

Santa Ana Unified, a 57,000-student district, has more than four in five students receiving federal meal subsidies totaling $24.9 million annually, according to the report.

The report said Santa Ana Unified's cafeteria fund at one point amassed a $16 million surplus that was growing by more than $2 million a year.

Not only was Santa Ana violating federal laws by hoarding such amounts, but the meal program was severely understaffed and being routinely cited for health-code violations at the time, the report noted.

A 2010 report by Santa Ana Unified's auditor found that 21 percent of the positions in the district's food services department were “routinely vacant,” the Senate report noted. County health inspectors, meanwhile, cited the district 22 times in a four-year period for cockroaches and rodents at 15 campuses and the central kitchen.

The report, however, also said the number of citations at Santa Ana Unified's food facilities did not stand out as being unusually high, according to a county food inspector.

“This happens to anyone in the restaurant business, and we're bigger than a restaurant,” Palacio said. “We serve about 100,000 meals every day at 60 sites.”

Uses for meal funds restricted

School districts receive federal and state money that subsidizes the cost of providing free and low-cost breakfasts and lunches to eligible students. The money is intended to pay for the food itself, plus cafeteria utility bills and salaries of food-service workers and custodians tasked with keeping food-preparation areas clean.

School districts also may bill to the cafeteria fund limited types of infrastructure improvements, such as purchasing a new refrigerator and updating the wall wiring for it. But projects such as kitchen roof repairs are considered capital expenditures, and the district must bill them to other accounts.

Former Santa Ana Unified food services director Jan Monforte, who reported the district's conduct to state authorities, testified that district officials at the time viewed her department as a “cash cow” whose funds they routinely tried to siphon. Monforte, a 30-year veteran of the school food-services industry, was fired in 2011 after one year on the job.

“If I would tell them, ‘Legally we cannot bill that to this fund,' they would make remarks about, ‘What's the big deal? Your department has lots of money; you can pay for that,' ” Monforte said in a Register interview.

“This is very, very typical of school districts, especially if they're just not feeling really ethical,” said Monforte, a Fullerton resident who also headed up Newport-Mesa Unified's food-services department for eight years. “The people who have been business managers in school districts are very aware of how the accounting works and how they can try to make things happen in a certain way.”

Monforte, a past president of the California School Nutrition Association, said she was fired without explanation at the end of a one-year probationary period. Her termination followed repeated clashes with senior district administrators about how to properly run the department, she said.

In the Senate report, Santa Ana Unified was cited for inaccurately billing $2.4 million in cafeteria-related salaries over a three-year period. The district violated federal laws by not requiring workers such as activity supervisors and custodians to log the hours they worked on cafeteria-related duties. Instead, the district estimated the hours of “only a selected number” of workers and extrapolated, the report noted.

State officials consequently ordered the district to repay all $2.4 million in salaries, a figure the district contested.

“The cost, the charge, was well within the rules,” Palacio said. “We just didn't document it to the degree we should have – we acknowledge that.”

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